Hotel brand companies’ big push to increase direct bookings so far have fallen flat.
It’s been more than a year since several major hotel brand companies introduced campaigns to prod consumers to join its loyalty programs in exchange for discounted room rates when they book directly through the brands’ websites.
Today, there is little evidence these expensive marketing campaigns have significantly moved the needle in the direction brand companies had hoped. In fact, while a few chains have seen substantial increases in direct bookings, most have strained to accomplish more than one-percentage-point movements in the direction of direct bookings. Certainly, the return on investment in these expensive ad programs has yet to be clearly demonstrated.
There are a number of ways to analyze the competition between online travel agencies and hotel brand companies that are promoting direct booking initiatives. But no matter how you slice it, the OTAs are still winning the distribution data.
Hitwise reported that in the past year the market shares of OTAs and hotel direct-booking channels have barely changed. Between May 2016 and May 2017, three of the 10 largest OTA sites had increases in bookings. And while six of 10 brand companies have registered increases in direct bookings during that time, the gains have mostly been minimal.
Wyndham Hotel Group had the largest jump in share of online bookings (from a miniscule 2.85% to 9.61%). Marriott International followed with a 1.07-point increase to an industry-leading 26% share of online bookings by hotel companies. The other four companies each showed less than one-percentage-point improvement.
Of course, the hotel industry continues to grow and sell more rooms each year so the pie is growing and both hotels and OTAs are booking more business—even if the share of those bookings hasn’t changed much.
From a consumer perspective, the chains haven’t yet made their case for direct booking. In fact, most people I know outside of the hotel business still firmly believe they somehow can find cheaper room rates online if they just search hard enough.
In a recent research note sent to clients, security analysts at Piper Jaffray noted that cheaper room rates were found on OTA or metasearch sites at 21% of hotels studied. Booking directly on a hotel website was the less-expensive option at just 13% of hotels covered in the research. In two-thirds of cases, the rates were the same on OTA and hotel sites.
And while brand companies have been touting cheaper rates for consumers who book directly, perhaps they need to change the tone of their messages to encourage more users to eschew OTAs in favor of hotel or chain websites.
For example, they could cite research from J.D. Power that shows travelers who book through a third-party distribution sites, such as OTAs, are more likely to experience problems and be less satisfied with their stays than those who book directly.
Everyone wants a deal, but many consumers would rather feel secure in that their reservations will be honored when they show up at an otherwise full hotel at 10 p.m. Anecdotally, there have been some consumer horror stories of OTA-based reservations for which hotel front-desk clerks have no record, leaving guests with few options for recourse. This is the message hotel marketers need to stress more than the minimal rate discounts offered through loyalty programs.
Not every hotel company has a dim view of OTAs. Extended Stay America welcomes business from these platforms and relies on it to build certain segments of its business. During a recent call with stock analysts to discuss the company’s second-quarter earnings, ESA executives attributed a measure of the chain’s success in the leisure market to its reliance on OTAs.
ESA President and CEO Gerardo Lopez told analysts reservations from OTAs represent a little more than 20% of the company’s overall bookings, with business from this channel growing at double-digit rates for three years.
While individual properties, he said, generate the chain’s core extended-stay business of 30 nights and longer, they rely on OTA channels primarily for two- and three-night stays that typically book at the last minute.
“Our marketing budgets are not of the size that allow us to do major broadcast television advertising,” Lopez said. “A significant number of our OTA guests are first-timers. So what we pay in commissions to the OTAs is not just the commission rate … but we think of it as part of our marketing budget, and that has worked really well for us.”
On a bigger scale, Marriott International’s recent announcement of a joint venture with Chinese digital giant Alibaba Group Holding is another example of hotel brand companies embracing aspects of OTAs.
According to Marriott, the joint venture will operate Marriott’s Chinese-language digital channels, which include Chinese language versions of its booking websites and its mobile apps. It will also market directly to Alibaba’s customer base and provide a link between Marriott’s and Alibaba’s loyalty programs.
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